<PAGE>   1
                    U.S. SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                    FORM 10-Q

(Mark One)
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of
    1934

For the quarterly period ended July 31, 1999

[ ] Transition report under Section 13 or 15(d) of the Exchange Act

For the transition period from _________ to _________

Commission file number   1-13437

                    THE SOURCE INFORMATION MANAGEMENT COMPANY
        (Exact Name of Small Business Issuer as Specified in Its Charter)


       MISSOURI                                                43-1710906
(State or Other Jurisdiction of                             (I.R.S. Employer
Incorporation or Organization)                             Identification No.)

                             11644 LILBURN PARK ROAD
                            ST. LOUIS, MISSOURI 63146
                    (Address of Principal Executive Offices)


                                 (314) 995-9040
                (Issuer's Telephone Number, Including Area Code)


                                 NOT APPLICABLE
         (Former Name, Former Address and Former Fiscal Year, if Changed
                               Since Last Report)

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act during the past
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days.

                                 Yes [X] No [ ]

         State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date.

           Class                         Outstanding on September 1, 1999

  Common Stock, $.01 Par Value                  16,673,891


<PAGE>   2


                   THE SOURCE INFORMATION MANAGEMENT COMPANY

                                      INDEX

                         PART I - FINANCIAL INFORMATION

<TABLE>
<CAPTION>
                                                                                                               Page
<S>           <C>                                                                                              <C>
ITEM 1.       Financial Statements

              Consolidated Balance Sheets as of
              July 31, 1999 and January 31, 1999

              Consolidated Statements of Income for the three months
              and six months ended July 31, 1999 and 1998

              Consolidated Statements of Comprehensive Income for the three
              months and six months ended July 31, 1999 and 1998

              Consolidated Statement of Stockholders'
              Equity for the six months ended July 31, 1999

              Consolidated Statements of Cash Flows for
              the six months ended July 31, 1999 and 1998

              Notes to Consolidated Financial Statements

ITEM 2.       Management's Discussion and Analysis


                           PART II - OTHER INFORMATION

ITEM 1.       Legal Proceedings

ITEM 2.       Changes in Securities

ITEM 3.       Defaults Upon Senior Securities

ITEM 4.       Submission of Matters to a Vote of Security Holders

ITEM 5.       Other Information

ITEM 6.       Exhibits and Reports on Form 8-K
</TABLE>







<PAGE>   3
                                       THE SOURCE INFORMATION MANAGEMENT COMPANY


                                                     CONSOLIDATED BALANCE SHEETS

                                                                     (unaudited)
<TABLE>
<CAPTION>
                                                                                       January 31, 1999     July 31, 1999
-----------------------------------------------------------------------------------------------------------------------------
<S>                                                                                    <C>                  <C>
ASSETS
CURRENT
      Cash                                                                             $        752,695     $      2,897,322
      Trade receivables (net of allowance for doubtful accounts of $469,658 and              32,593,428           44,760,857
      $987,858)
      Income taxes receivable                                                                   262,877                    -
      Notes receivable - officers (Note 2)                                                            -              173,571
      Inventories (Note 3)                                                                    1,395,699            3,425,176
      Other current assets                                                                      263,692            1,017,818
-----------------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS                                                                         35,268,391           52,274,744
-----------------------------------------------------------------------------------------------------------------------------

Land                                                                                            120,000            1,331,875
Manufacturing plant                                                                             680,000            5,885,508
Office equipment and furniture                                                                5,713,459            9,449,127
-----------------------------------------------------------------------------------------------------------------------------
Property, Plant and Equipment                                                                 6,513,459           16,666,510
Less accumulated depreciation and amortization                                                3,179,359            4,890,280
-----------------------------------------------------------------------------------------------------------------------------
NET PROPERTY, PLANT AND EQUIPMENT                                                             3,334,100           11,776,230
-----------------------------------------------------------------------------------------------------------------------------

OTHER ASSETS
      Notes receivable - officers (Note 2)                                                            -              801,429
      Goodwill, net of accumulated amortization of $648,600 and $1,764,560  (Note 4)         29,608,254           44,536,888
      Deferred tax asset                                                                          7,000                    -
      Other                                                                                     789,307            2,075,533
-----------------------------------------------------------------------------------------------------------------------------
TOTAL OTHER ASSETS                                                                           30,404,561           47,413,850
-----------------------------------------------------------------------------------------------------------------------------

                                                                                       $     69,007,052    $     111,464,824
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>

          See accompanying notes to consolidated financial statements.

1
<PAGE>   4



                                       THE SOURCE INFORMATION MANAGEMENT COMPANY

                                                     CONSOLIDATED BALANCE SHEETS

                                                                     (unaudited)
<TABLE>
<CAPTION>

                                                                                        January 31, 1999     July 31, 1999
-----------------------------------------------------------------------------------------------------------------------------
<S>                                                                                     <C>                  <C>
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT
     Checks issued against future deposits                                              $       2,876,922    $       446,851
     Accounts payable and accrued expenses                                                      3,727,529          4,783,688
     Income taxes payable                                                                               -            815,740
     Due to retailers                                                                           2,737,077          4,766,001
     Deferred revenues                                                                          3,129,241            277,223
     Deferred income taxes                                                                        718,000            683,000
     Current maturities of long-term debt (Note 5)                                                 66,057            375,472
-----------------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES                                                                      13,254,826         12,147,975
-----------------------------------------------------------------------------------------------------------------------------
LONG-TERM DEBT, LESS CURRENT MATURITIES (NOTE 5)                                                3,442,000          3,983,407
-----------------------------------------------------------------------------------------------------------------------------
DEFERRED INCOME TAXES                                                                                   -            397,462
-----------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES                                                                              16,696,826         16,528,844
-----------------------------------------------------------------------------------------------------------------------------

COMMITMENTS
-----------------------------------------------------------------------------------------------------------------------------

STOCKHOLDER'S EQUITY
Contributed Capital:
     Common Stock, $.01 par - shares authorized, 40,000,000; 11,751,425 issued,
     of which 8,000 are being held as Treasury Stock at January 31,
     1999 and 16,681,891 issued, of which 8,000 is being held as Treasury                         117,513            166,817
     Stock at July 31, 1999
     Preferred Stock, $.01 par - shares authorized, 2,000,000; 1,473,281 and
     -0- issued and outstanding, respectively at January 31, 1999 and July 31,                     14,733                  -
     1999
     Additional paid-in-capital                                                                46,451,971         85,288,989
-----------------------------------------------------------------------------------------------------------------------------
     Total contributed capital                                                                 46,584,217         85,455,806
Other comprehensive income                                                                              -           (69,039)
Retained earnings                                                                               5,767,140          9,590,344
-----------------------------------------------------------------------------------------------------------------------------
     Total contributed capital and retained earnings                                           52,351,357         94,977,111
Less:  Treasury Stock (8,000 shares at cost)                                                     (41,131)           (41,131)
-----------------------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY                                                                     52,310,226         94,935,980
-----------------------------------------------------------------------------------------------------------------------------

                                                                                       $       69,007,052    $   111,464,824
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>


2
<PAGE>   5



                                       THE SOURCE INFORMATION MANAGEMENT COMPANY

                                               CONSOLIDATED STATEMENTS OF INCOME
                                                                     (UNAUDITED)

<TABLE>
<CAPTION>
                                                         Three Months Ended July 31,          Six Months Ended July 31,
                                                             1998             1999              1998             1999
-----------------------------------------------------------------------------------------------------------------------------

<S>                                                      <C>            <C>                 <C>               <C>
Service Revenues                                         $   3,580,588  $      3,780,339    $    7,175,790    $    7,333,465
Manufacturing Revenues                                               -        12,203,597                 -        25,130,158
-----------------------------------------------------------------------------------------------------------------------------
                                                             3,580,588        15,983,936         7,175,790        32,463,623
-----------------------------------------------------------------------------------------------------------------------------
Cost of Service Revenues                                     1,579,499         2,267,465         3,145,906         4,247,846
Cost of Goods Sold                                                   -         6,850,675                 -        14,482,333
-----------------------------------------------------------------------------------------------------------------------------
                                                             1,579,499         9,118,140         3,145,906        18,730,179
-----------------------------------------------------------------------------------------------------------------------------
                                                             2,001,089         6,865,796         4,029,884        13,733,444
Selling, General and Administrative Expense                    553,247         3,120,124         1,219,921         6,453,748
-----------------------------------------------------------------------------------------------------------------------------
Operating Income                                             1,447,842         3,745,672         2,809,963         7,279,696
-----------------------------------------------------------------------------------------------------------------------------
Other Income (Expense)
            Interest income                                      9,692            35,327            10,280            42,633
            Interest expense                                  (98,635)         (401,066)         (218,878)         (696,135)
            Other                                              (3,131)            35,095           (5,950)           173,944
-----------------------------------------------------------------------------------------------------------------------------
Total Other Income (Expense)                                  (92,074)         (330,644)         (214,548)         (479,558)
-----------------------------------------------------------------------------------------------------------------------------
Income Before Income Taxes                                   1,355,768         3,415,028         2,595,415         6,800,138
Income Tax Expense                                             565,000         1,485,870         1,078,000         2,976,934
-----------------------------------------------------------------------------------------------------------------------------
Net Income                                               $     790,768  $      1,929,158    $    1,517,415    $    3,823,204
-----------------------------------------------------------------------------------------------------------------------------

Earnings per Share - Basic                               $         .09  $            .13    $          .18    $          .28
-----------------------------------------------------------------------------------------------------------------------------

Weighted Average of Shares Outstanding - Basic (Note 6)      8,720,594        14,644,334         8,375,035        13,622,388
-----------------------------------------------------------------------------------------------------------------------------

Earnings per Share - Diluted                             $         .09  $            .12    $          .17    $          .25
-----------------------------------------------------------------------------------------------------------------------------

Weighted Average of Shares Outstanding - Diluted (Note       9,238,183        16,053,969         8,865,692        15,314,751
6)
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>


                                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                                                                     (UNAUDITED)

<TABLE>
<CAPTION>

                                                         Three Months Ended July 31,          Six Months Ended July 31,
                                                             1998             1999              1998             1999
-----------------------------------------------------------------------------------------------------------------------------

<S>                                                      <C>            <C>                 <C>               <C>
Net Income                                               $     790,768  $      1,929,158    $    1,517,415    $    3,823,204
Foreign Currency Translation Adjustment                              -          (94,047)                 -          (69,039)
-----------------------------------------------------------------------------------------------------------------------------
Comprehensive Income                                     $     790,768  $      1,835,111    $    1,517,415    $    3,754,165
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>

                    See accompanying notes to consolidated financial statements.

3
<PAGE>   6


                                       THE SOURCE INFORMATION MANAGEMENT COMPANY

                                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                                                     (UNAUDITED)
                                                          (dollars in thousands)
<TABLE>
<CAPTION>

                                                                                            Other
                                                                   Additional              Compre-                       Total
                            Preferred Stock      Common Stock       Paid - in   Retained   hensive   Treasury Stock  Stockholders'
                         --------------------------------------                                    ----------------
                           Shares    Amount   Shares    Amount      Capital     Earnings   Income   Shares   Amount     Equity
----------------------------------------------------------------------------------------------------------------------------------

<S>                        <C>       <C>     <C>         <C>         <C>        <C>          <C>    <C>     <C>        <C>
Balance, January 31, 1999  1,473,281  $  15  11,751,425  $  117      $ 46,452   $   5,767    $    - 8.000   $   (41)   $   52,310

Conversion of Class A     (1,473,281)   (15)  1,473,281      15                                                                  -
Preferred Stock to
Common Stock

Issuance of Common                            3,000,000      30        35,937                                               35,967
Stock

Exercise of stock                                34,419       -           163                                                  163
options

Exercise of warrants                              1,867       -             7                                                    7

Directors fees                                      570       -             3                                                    3

Warrants issued for                                                        34                                                   34
consulting services

Acquisition of MYCO,                            134,615       1           874                                                  875
Inc.  (Note 4)

Acquisition of                                  285,714       3         1,819                                                1,822
Chestnut Display
Systems, Inc. (Note 4)

Foreign currency                                                                                (69)                          (69)
translation adjustment

Net income                                                                          3,823                                    3,823

-----------------------------------------------------------------------------------------------------------------------------------
Balance, July 31, 1999             -  $   -  16,681,891  $  166      $ 85,289   $   9,590    $  (69) 8,000  $   (41)   $   94,935
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                    See accompanying notes to consolidated financial statements.
4
<PAGE>   7
                                       THE SOURCE INFORMATION MANAGEMENT COMPANY

<TABLE>
<CAPTION>
                                                                                 CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                                                                           (UNAUDITED)

Six Months Ended July 31,                                                                    1998             1999
-----------------------------------------------------------------------------------------------------------------------
<S>                                                                                    <C>               <C>
OPERATING ACTIVITIES
     Net income                                                                        $     1,517,415   $   3,823,204
     Adjustments to reconcile net income to net cash
       provided by (used in) operating activities:
          Depreciation and amortization                                                        252,944       1,638,007
          Provision for losses on accounts receivable                                                -       (303,493)
          Deferred income taxes                                                                 98,000         362,462
          Other                                                                                 13,000          52,206
          Changes in assets and liabilities:
             Increase in accounts receivable                                               (4,432,162)     (4,319,119)
             Decrease in inventories                                                                 -         110,910
             Decrease (increase) in other assets                                               543,440       (678,674)
             Increase (decrease) in checks issued against future
             deposits                                                                        2,209,110     (2,430,071)
             Increase (decrease)  in accounts payable and accrued
             expenses                                                                          793,832     (5,134,093)
             Decrease in deferred revenues                                                           -     (2,852,018)
             Increase in amounts due customers                                                  85,893       2,028,924
-----------------------------------------------------------------------------------------------------------------------
CASH USED IN OPERATING ACTIVITIES                                                            1,081,472     (7,701,755)
-----------------------------------------------------------------------------------------------------------------------

INVESTMENT ACTIVITIES
     Acquisition of Periodical Concepts                                                    (2,500,000)               -
     Acquisition of Chestnut Display Systems, Inc., net of cash
     acquired                                                                                        -     (3,458,429)
     Acquisition of MYCO, Inc., net of cash acquired                                                 -     (13,536,049)
     Acquisition of 132127 Canada Inc. (Promark), net of cash
     acquired                                                                                        -       (862,130)
     Acquisition of Aaron Wire and Metal Products, Ltd, net of cash
     acquired                                                                                        -     (1,600,619)
     Additional acquisition costs                                                                    -       (134,677)
     Capital expenditures                                                                    (325,742)     (2,310,637)
     Loans to officers                                                                               -       (975,000)
     Collections on  loan to officer                                                            22,093               -
     Increase in cash surrender value of life insurance                                       (21,260)        (23,083)
     Other                                                                                           -             879
-----------------------------------------------------------------------------------------------------------------------
CASH USED IN INVESTING ACTIVITIES                                                          (2,824,909)     (22,899,745)
-----------------------------------------------------------------------------------------------------------------------
</TABLE>

                    See accompanying notes to consolidated financial statements.

                                       5


<PAGE>   8





                                       THE SOURCE INFORMATION MANAGEMENT COMPANY

<TABLE>
<CAPTION>
                                                                                 CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                                                                           (UNAUDITED)

Six Months Ended July 31,                                                                    1998             1999
-----------------------------------------------------------------------------------------------------------------------
<S>                                                                                    <C>             <C>
FINANCING ACTIVITIES
     Proceeds from issuance of Common Stock                                                  8,061,800      36,137,652
     Borrowings under credit facility                                                       16,134,000      36,944,000
     Principal payments on credit facility                                                (22,399,000)     (40,146,000)
     Borrowings under long-term debt agreements                                                      -      15,000,000
     Principal payments on long-term debt agreements                                          (24,178)     (15,010,901)
     Deferred loan costs                                                                             -       (178,624)
     Other                                                                                         200               -
-----------------------------------------------------------------------------------------------------------------------
CASH PROVIDED BY FINANCING ACTIVITIES                                                        1,772,822      32,746,127
-----------------------------------------------------------------------------------------------------------------------

INCREASE IN CASH                                                                                29,385       2,144,627

CASH, beginning of period                                                                       31,455         752,695
-----------------------------------------------------------------------------------------------------------------------

CASH, end of period                                                                    $        60,840   $   2,897,322
-----------------------------------------------------------------------------------------------------------------------
</TABLE>



                    See accompanying notes to consolidated financial statements.

                                       6





<PAGE>   9


                                       The Source Information Management Company

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

--------------------------------------------------------------------------------

<TABLE>

<S>  <C>                            <C>
1.   Basis of Presentation          The consolidated
                                    financial statements as of July 31, 1999 and
                                    for the three and six month periods ended
                                    July 31, 1999 and 1998, include, in the
                                    opinion of management, all adjustments
                                    (consisting of normal recurring adjustments
                                    and reclassifications) necessary to present
                                    fairly the financial position, results of
                                    operations and cash flows at July 31, 1999
                                    and for all periods presented.

                                    Certain information and footnote disclosures
                                    normally included in financial statements
                                    prepared in accordance with generally
                                    accepted accounting principles have been
                                    condensed or omitted. It is suggested that
                                    these consolidated financial statements be
                                    read in conjunction with the consolidated
                                    financial statements and notes thereto
                                    incorporated by reference in the Company's
                                    Form 10-KSB for the year ended January 31,
                                    1999. The results of operations for the
                                    three and six month periods ended July 31,
                                    1999 are not necessarily indicative of the
                                    operating results to be expected for the
                                    full year.

                                    The preparation of financial statements in
                                    conformity with generally accepted
                                    accounting principles requires management to
                                    make certain estimates and assumptions that
                                    affect the reported amounts of assets and
                                    liabilities and disclosure of contingent
                                    assets and liabilities at the date of
                                    financial statements and the reported
                                    amounts of revenues and expenses during the
                                    reporting period. Actual results could
                                    differ from those estimates.

2.   Related Party                  In connection with his employment with the
                                    Company, Richard Jacobsen received
                                    Transactions two loans from the Company in
                                    the amounts of $600,000 ("Loan 1") and
                                    $375,000 ("Loan 2"). Loan 1, including
                                    interest, will be forgiven over a 5-year
                                    term and Loan 2, including interest, will be
                                    forgiven over a 7-year term, provided, in
                                    each case, that Mr. Jacobsen remains an
                                    employee of the Company. The loans bear
                                    interest at 5% per annum.

                                    In May 1999, we purchased our leased
                                    facility in High Point, North Carolina for
                                    $1.8 million. The facility was owned by a
                                    partnership in which stockholders of the
                                    Company were partners. The Board of
                                    Directors appointed Timothy Braswell, an
                                    independent director, to negotiate the
                                    transaction on the Company's behalf and,
                                    based on Mr. Braswell's recommendation, the
                                    Board believes the terms of the purchase
                                    were fair to the Company.

3    Inventories                    Inventories consist of the following:
</TABLE>

<TABLE>
<CAPTION>
                                                                                       January 31,         July 31
                                                                                           1999              1999
                                    ------------------------------------------------------------------------------------
<S>                                  <C>                                          <C>                <C>
                                     Raw materials                                $       576,101    $   1,079,116
                                     Work-in-process                                      805,932        1,580,139
                                     Finished goods                                        13,666          765,921
                                    ------------------------------------------------------------------------------------

                                                                                  $     1,395,699    $   3,425,176
                                    ------------------------------------------------------------------------------------
</TABLE>

7


<PAGE>   10

                                       The Source Information Management Company

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

--------------------------------------------------------------------------------
<TABLE>

<S>  <C>                            <C>
4.   Business                       Acquisition of Periodical Concepts
     Combinations

                                    On July 27, 1998, the Company acquired all
                                    the assets of Periodical Concepts, a Texas
                                    general partnership doing business as PC2,
                                    for $2,500,000 in cash. Prior to the
                                    acquisition, PC2 provided information and
                                    marketing services to retail stores selling
                                    magazines and other periodicals. The Company
                                    intends to continue the operation of this
                                    business and does not intend to
                                    substantially change the nature of PC2's
                                    operation.

                                    This transaction has been accounted for as a
                                    purchase, and accordingly, the assets and
                                    liabilities have been recorded at fair
                                    market value. Results of operations have
                                    been included as of the effective date of
                                    the transaction. The purchase price exceeds
                                    the fair value of the assets acquired by
                                    approximately $2,400,000 and is being
                                    amortized straight line over 15 years.

                                    Acquisition of Yeager Industries, Inc.

                                    On January 7, 1999, the Company acquired the
                                    net assets of Yeager Industries, Inc. for
                                    $2.3 million in cash and 164,289 shares of
                                    the Company's Common Stock, valued at the
                                    time of the acquisition at $1.15 million.
                                    The purchase price could be increased by up
                                    to $500,000 depending on Yeager's
                                    performance over the next two years. Yeager
                                    manufactures front-end display racks from
                                    facilities in Philadelphia, Pennsylvania.

                                    This transaction has been accounted for as a
                                    purchase, and accordingly, the assets and
                                    liabilities have been recorded at fair
                                    market value. Results of operations have
                                    been included as of the effective date of
                                    the transaction. The purchase price exceeds
                                    the fair value of the assets acquired by
                                    approximately $1,038,000 and is being
                                    amortized straight line over 20 years.

                                    Acquisition of U.S. Marketing Services, Inc.

                                    On January 7, 1999 the Company acquired all
                                    of the stock of U.S. Marketing Services,
                                    Inc. ("U.S. Marketing") in exchange for
                                    1,926,719 shares of the Company's Common
                                    Stock and 1,473,281 shares of the Company's
                                    Class A Convertible Preferred Stock, valued
                                    at the time of the acquisition at $26.3
                                    million in total. The Class A Convertible
                                    Preferred Stock was converted into an equal
                                    number of Common Shares on March 30, 1999.
                                    U.S. Marketing's subsidiary Brand
                                    Manufacturing Corporation ("Brand")
                                    manufactures front-end display racks from
                                    manufacturing facilities in Brooklyn, New
                                    York and a warehouse and distribution
                                    facility in New Jersey. Through its
                                    affiliates, Brand provides trucking and
                                    freight services and removes and disposes of
                                    display racks no longer required by its
                                    customers.

                                    This transaction has been accounted for as a
                                    purchase, and accordingly, the assets and
                                    liabilities have been recorded at fair
                                    market value. Results of operations have
                                    been included as of the effective date of
                                    the transaction. The purchase price exceeded
                                    the fair value of the assets acquired by
                                    approximately $23,064,000 and is being
                                    amortized straight line over 20 years.
                                    Unaudited pro forma results of operations
                                    for 1998 and 1999 for the Company and U.S.
                                    Marketing are listed below (in thousands):
</TABLE>
8
<PAGE>   11


                                       The Source Information Management Company

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                    Year Ended January 31,                                         1998            1999
                                    -------------------------------------------------------------------------------------
<S>                                 <C>                         <C>                         <C>           <C>
                                    Total Revenues              As reported                 $    11,804   $      21,100
                                                                Pro forma                        31,405          33,539
                                    Net Income                  As reported                       1,589           3,867
                                                                Pro forma                         3,821           1,695
                                    Earnings Per Share
                                      Basic                     As reported                 $       .23   $         .42
                                      Diluted                   As reported                         .22             .40
                                      Basic                     Pro forma                           .37             .14
                                      Diluted                   Pro forma                           .37             .13
                                    -------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<S>                                 <C>
                                    Acquisition of Chestnut Display Systems, Inc.

                                    On February 1, 1999 the Company acquired the
                                    net assets of Chestnut Display Systems, Inc.
                                    and its affiliate Chestnut Display Systems
                                    (North), Inc. for $3.6 million in cash and
                                    285,714 shares of the Company's Common
                                    Stock, valued at the time of acquisition at
                                    $1.8 million. The purchase price for
                                    Chestnut may be increased to a value
                                    (including the amounts already paid) not to
                                    exceed $9.5 million if Chestnut meets
                                    certain performance goals during fiscal 2000
                                    and 2001. Any increase in the purchase price
                                    will be paid 50% in cash and 50% in shares
                                    of Common Stock. The shares will be valued
                                    using a formula contained in the acquisition
                                    agreement, subject to a minimum value of
                                    $5.00 per share and a maximum value of $7.00
                                    per share. Chestnut manufactures front-end
                                    display racks from facilities in Greenville,
                                    South Carolina and Jacksonville, Florida.

                                    This transaction has been accounted for as a
                                    purchase, and accordingly, the assets and
                                    liabilities have been recorded at fair
                                    market value. Results of operations have
                                    been included as of the effective date of
                                    the transaction. The purchase price exceeded
                                    the fair value of the assets acquired by
                                    approximately $3,496,000 and is being
                                    amortized straight line over 20 years.

                                    Acquisition of MYCO, Inc.

                                    On February 26, 1999 the Company acquired
                                    the net assets of MYCO, Inc. ("MYCO") for
                                    $12 million in cash and 134,615 shares of
                                    the Company's Common Stock, valued at the
                                    time of acquisition at $875,000. The Company
                                    also assumed MYCO's industrial revenue bond
                                    indebtedness of $4 million and repaid MYCO's
                                    indebtedness of $1.5 million. The purchase
                                    price may be increased by up to an
                                    additional 250,000 shares of Common Stock
                                    depending on MYCO's performance in the
                                    twelve months following the acquisition.
                                    MYCO is a Rockford, Illinois manufacturer of
                                    front-end display racks.

                                    This transaction has been accounted for as a
                                    purchase, and accordingly, the assets and
                                    liabilities have been recorded at fair
                                    market value. Results of operations have
                                    been included as of the effective date of
                                    the transaction. The purchase price exceeded
                                    the fair value of the assets acquired by
                                    approximately $9,923,000 and is being
                                    amortized straight line over 20 years.

                                    Acquisition of 132127 Canada, Inc.
</TABLE>
9
<PAGE>   12

                                       The Source Information Management Company

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
<TABLE>
<S>                                 <C>
                                    On March 23, 1999 the Company also purchased
                                    the net assets of 132127 Canada, Inc., known
                                    as ProMark, for $1.5 million Canadian.
                                    ProMark is a Canadian corporation
                                    headquartered in Toronto which provides
                                    rebate and information services to retail
                                    customers throughout Canada.

                                    This transaction has been accounted for as a
                                    purchase, and accordingly, the assets and
                                    liabilities have been recorded at fair
                                    market value. Results of operations have
                                    been included as of the effective date of
                                    the transaction. The purchase price exceeded
                                    the fair value of the assets acquired by
                                    approximately $639,000 and is being
                                    amortized straight line over 20 years.

                                    Acquisition of Aaron Wire and Metal Products,
                                    Ltd.

                                    On July 1, 1999 the Company acquired all of
                                    the stock of Aaron Wire and Metal Products,
                                    Ltd. ("Aaron Wire") for $2.4 million
                                    Canadian. Aaron Wire manufactures front-end
                                    display racks from manufacturing facilities
                                    in Vancouver, British Columbia.

                                    This transaction has been accounted for as a
                                    purchase, and accordingly, the assets and
                                    liabilities have been recorded at fair
                                    market value. Results of operations have
                                    been included as of the effective date of
                                    the transaction. The purchase price exceeded
                                    the fair value of the assets acquired by
                                    approximately $1,794,000 and is being
                                    amortized straight line over 20 years.
</TABLE>

10


<PAGE>   13


                                       The Source Information Management Company

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
<TABLE>
<S><C>
5.   LONG-TERM DEBT                 Long-term debt consists of:
     AND REVOLVING
     CREDIT FACILITY
                                                                                     January 31,             July 31,
                                                                                        1999                   1999
                                    ------------------------------------------------------------------------------------
                                    Revolving Credit Facility                       $       3,202,000     $            -

                                    Term note payable to bank                                       -                  -

                                    Industrial Revenue Bonds                                        -          4,000,000

                                    Unsecured note payable to former owners of
                                    acquired Company, non-interest bearing, payable
                                    in five equal annual installments beginning in
                                    November 1999                                             300,000            300,000

                                    Term note payable in monthly installments of
                                    $629 through November 1999, collateralized by
                                    an automobile

                                                                                                6,057              2,472

                                    Capital leases                                                  -             56,407

                                    ------------------------------------------------------------------------------------
                                    Total Long-term Debt                                    3,508,057          4,358,879

                                    Less current maturities                                    66,057            375,472
                                    ------------------------------------------------------------------------------------

                                    Long-term Debt                                  $       3,442,000     $    3,983,407
                                    ------------------------------------------------------------------------------------

                                    On March 31, 1999 the Company entered into a
                                    new credit agreement with Wachovia Bank,
                                    N.A. The new credit agreement enables the
                                    Company to borrow up to $15 million under a
                                    revolving credit facility and $15 million
                                    under a term loan. The term loan was repaid
                                    in July 1999 with the proceeds of the
                                    Company's common stock offering. The
                                    revolving credit facility has no termination
                                    date, although, Wachovia Bank has the right
                                    to terminate the revolving credit facility
                                    upon not less than 13 months prior written
                                    notice.

                                    Borrowings under the revolving credit
                                    facility bear interest at a rate equal to
                                    the monthly LIBOR index rate plus a
                                    percentage ranging from 2.0% to 3.5%
                                    depending upon the Company's ratio of funded
                                    debt to earnings before interest, taxes,
                                    depreciation and amortization. The credit
                                    facility is secured by an interest in
                                    substantially all of the Company's assets.
                                    Under the credit agreement, the Company will
                                    be required to maintain certain financial
                                    ratios. Since the end of the quarter,
                                    Wachovia has committed to increase the
                                    credit facility to $40 million.

                                    In connection with the acquisition of MYCO,
                                    Inc., the Company assumed the liabilities of
                                    MYCO's Industrial Revenue Bonds. On January
                                    30, 1995, the City of
</TABLE>
<PAGE>   14

                                       The Source Information Management Company

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S><C>
                                    Rockford issued $4 million of its Industrial
                                    Project Revenue Bonds, Series 1995, and the
                                    proceeds were deposited with the Amalgamated
                                    Bank of Chicago, as trustee. Wachovia Bank,
                                    N.A. has issued a rolling 13-month letter of
                                    credit for $4.1 million to the Company. The
                                    bonds are secured by the trustee's indenture
                                    and the $4.1 million letter of credit. The
                                    letter of credit is secured by substantially
                                    all of the assets of the Company. The bonds
                                    bear interest at a variable weekly rate
                                    (approximately 80% of the Treasury Rate) not
                                    to exceed 15% per annum. The bonds mature on
                                    January 1, 2030. Fees related to the letter
                                    of credit are 1% per annum of the
                                    outstanding bond principal plus accrued
                                    interest.

6.  EARNINGS PER                    A reconciliation of the denominators of the
    SHARE                           basic and diluted earnings per share
                                    computations are as follows:


                                                                        Three Months Ended          Six Months Ended
                                                                            July 31,                    July 31,
                                                                        1998         1999         1998          1999
                                    -------------------------------------------------------------------------------------
                                    Weighted average number of
                                    common shares outstanding         8,720,594   14,644,334    8,375,035     13,622,388

                                    Effect of dilutive securities
                                    - stock options and warrants        517,589    1,409,635      490,657      1,692,363
                                    -------------------------------------------------------------------------------------

                                    Weighted average number of
                                    common shares outstanding - as
                                    adjusted                          9,238,183   16,053,969    8,865,692     15,314,751
                                    -------------------------------------------------------------------------------------

                                    The following options and warrants were not
                                    included in the computation of diluted EPS
                                    because the exercise prices were greater
                                    than the average market price of the common
                                    shares. All were still outstanding at July
                                    31, 1999.

                                       Number of Shares
                                      Exercisable Under                                                  Expiration
                                       Options/Warrants          Exercise Price        Grant Date           Date
                                    -------------------------------------------------------------------------------------
                                           5,000                     14.94              7/19/99           7/19/09
                                    -------------------------------------------------------------------------------------

7.  SUPPLEMENTAL CASH               Supplemental information on interest and
    FLOW INFORMATION                income taxes paid is as follows:

                                    Six Months Ended July 31,                             1998                 1999
                                    ------------------------------------------------------------------------------------
                                    Interest                                         $     133,000        $     702,000

                                    Income Taxes                                     $     189,000        $   1,947,000
                                    ------------------------------------------------------------------------------------

                                    In connection with the acquisitions in
                                    January 1999, the Company issued 2,091,008
                                    shares of Common Stock and 1,473,281 shares
                                    of Class A Convertible Preferred Stock which
                                    were converted to an equal number of common
                                    shares on March 30, 1999.


</TABLE>
                                       12

<PAGE>   15

                                       The Source Information Management Company

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S><C>
                           In connection with the acquisitions in
                           February 1999, the Company issued 420,329
                           shares of Common Stock.

8.  SEGMENT FINANCIAL      The reportable segments of the Company are
    INFORMATION            claims submission and other information
                           services and display rack manufacturing.
                           Segment operating results are measured based
                           on income before taxes.


                                      Claims
                                     Submission
                                     and Other
                                     Information    Display Rack
                                     Services      Manufacturing     Eliminations           Total
------------------------------------------------------------------------------------------------------
QUARTER ENDED JULY 31, 1999
-------------------------------
Revenues                               4,457,910      12,203,597     $   (677,571)     $   15,983,936

Depreciation and amortization            210,491         653,737                              864,228
                                                                                -
Income before income taxes               545,891       2,869,137                            3,415,028
                                                                                -
Total Assets                          39,573,041      71,891,783                          111,464,824
                                                                                -
Capital Expenditures                   2,077,688          50,678                            2,128,366
                                                                                -

QUARTER ENDED JULY 31, 1998
-------------------------------
Revenues                               3,580,588                                            3,580,588
                                                               -                -
Depreciation and amortization            128,533                                              128,533
                                                               -                -
Income before income taxes             1,355,768                                            1,355,768
                                                               -                -
Total Assets                          30,294,074                                           30,294,074
                                                               -                -
Capital Expenditures                     198,236                                              198,236
                                                               -                -

SIX MONTHS ENDED JULY 31, 1999
-------------------------------
Revenues                               8,683,520      25,130,158       (1,350,055)         32,463,623

Depreciation and amortization            402,885       1,235,122                            1,638,007
                                                                                -
Income before income taxes             1,648,123       5,152,015                            6,800,138
                                                                                -
Total Assets                          39,573,041      71,891,783                          111,464,824
                                                                                -
Capital Expenditures                   2,217,747          92,890                            2,310,637
                                                                                -

SIX MONTHS ENDED JULY 31, 1998
-------------------------------
Revenues                               7,175,790               -                -           7,175,790

Depreciation and amortization            252,944               -                -             252,944

Income before income taxes             2,595,415               -                -           2,595,415

Total Assets                          30,294,074               -                -          30,294,074

Capital Expenditures                     325,742               -                -             325,742
------------------------------------------------------------------------------------------------------
</TABLE>


                                       13

<PAGE>   16



ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS.

OVERVIEW

We derive our revenues from (1) providing information and management services
for retail magazine sales to U.S. and Canadian retailers, magazine publishers,
confectioners and vendors of general merchandise sold at checkout counters and
(2) manufacturing display racks used by retailers at checkout counters.

During fiscal 1999 and the first six months of fiscal 2000, approximately 80.9%
and 73.4%, respectively, of our service revenues were derived from fees earned
in connection with the collection of incentive payments under our Claim
Submission and Advance Pay Programs. Payments collected from publishers under
the Advance Pay Program grew from 21.9% during fiscal 1998 to 30.4% during
fiscal 1999. Most incentive payment programs offer the retailer a cash rebate,
equal to a percentage of the retailer's net sales of the publisher's titles,
which is payable quarterly upon submission of a properly documented claim. Under
our Claim Submission Program, we submit claims for incentive payments on behalf
of the retailer and receive a fee based on the amounts collected. Under the
Advance Pay Program, we pay participating retailers a negotiated fixed
percentage of total quarterly incentive payments and pocket rental fees and then
collect the payments from the publishers for our own account.

Under both the Claim Submission Program and the Advance Pay Program, service
revenues are recognized at the time claims for incentive payments are
substantially completed for submission to the publishers. Our allowance for
doubtful accounts has to date been approximately 2% of accounts receivable. This
amount has been adequate to satisfy losses from uncollectible accounts
receivable. Under the Advance Pay Program, the revenues we recognize represent
the difference between the amount advanced to the retailer customer and the
amount claimed against the publisher.

PIN revenues consist of subscription fees. Subscribers to PIN pay for their
subscriptions on a quarterly basis. Subscriptions have an initial term of one
year and are automatically renewed for successive one-year terms unless earlier
terminated. PIN revenues are recognized ratably over the subscription term.
Commencing in fiscal 2000, we will begin to receive fees from each publisher
that subscribes to ICN. These fees will be recognized ratably over the annual
subscription term. We will also receive fees from publishers for advertising,
promotions and special programs on ICN.

Front-end management includes configuring and designing front-end display racks,
supervising fixture installation and collecting incentive payments from vendors
for product placement. Front-end management revenues are recognized as services
are performed. Historically, we received front-end management fees from either
retailers or manufacturers of display racks. As a result of our recent
acquisitions, we intend to provide front-end management services as a bundled
product offering with the manufacture of display racks. Consequently, a portion
of future revenue derived from front-end management services will be reflected
in manufacturing revenue.

Since January 1999, we acquired five manufacturers of front-end and
free-standing point-of-purchase display racks. Manufacturing display racks in
our own facilities allows us to be a full-service provider of management
services for the front-end of a customer's store. Beginning in fiscal 2000,
manufacturing will account for a substantial increase in revenues.

We intend to increase the operating margins in our manufacturing segment by
consolidating duplicative administrative functions, through increased purchasing
power, by using more efficient manufacturing methods in our acquired facilities
and by more efficiently utilizing plant capacities.

We generally recognize manufacturing revenues as products are shipped to
customers. When we receive payment prior to shipment, we record the amount as
deferred revenues and recognize the amount as revenues when products are
shipped. Upon request from a customer, the product can be stored for future
delivery for the convenience of the customer. In this case revenue is recognized
when the manufacturing and earnings processes are complete, which is when the
customer accepts title in writing, the product is invoiced with payment due in
the normal course of business, the delivery schedule is fixed and the products
are segregated from other goods. In our manufacturing segment, we also receive
trucking revenues for transporting racks, warehousing revenues for storing racks
and consulting revenues for providing consulting service relating to our
manufacturing. We generally recognize trucking revenues as shipments are
completed. Consulting and warehousing revenues are recognized when services are
rendered.

Cost of revenues generally includes personnel costs, including in some cases,
the cost of independent contractors. For manufacturing, cost of revenues also
includes the cost of materials and supplies directly used in the completion of
display racks. Cost of service revenues is an allocation of operating costs and
is not separately analyzed by management primarily


                                       14

<PAGE>   17

because operating costs do not vary significantly with revenues.

Selling, general and administrative expense includes corporate overhead, project
management, management information systems, executive compensation, human
resource expenses and finance expenses.

Beginning in fiscal 2000, manufacturing will account for a substantial increase
in our cost of revenues due to both the cost of materials and supplies used in
manufacturing and substantially increased personnel costs relating to our
manufacturing facilities. Selling, general and administrative expenses also will
increase substantially due to the increased scope of our operations beginning in
fiscal 2000.

See Note 8 in the "Notes to Consolidated Financial Statements" for certain
financial information on our two business segments, which are claims submission
and other information services, and display rack manufacturing.

RECENT ACQUISITIONS

Since January 7, 1999, we acquired the following companies. Each of the
acquisitions was accounted for as a purchase.

    -   U.S. MARKETING SERVICES, INC. U.S. Marketing is the parent of Brand
        Manufacturing Corporation, a manufacturer of front-end display racks
        with manufacturing facilities in Brooklyn, New York and a warehouse and
        distribution facility in New Jersey. Through its affiliates, Brand also
        provides trucking and freight services and removes and disposes of
        display racks no longer required by our customers. We acquired U.S.
        Marketing in January 1999 for 1,926,719 shares of our common stock and
        1,473,281 shares of our Class A Convertible Preferred Stock, valued at
        the time of the acquisition at $26.3 million in total. The Class A
        Convertible Preferred Stock was converted into an equal number of shares
        of common stock on March 30, 1999.

    -   YEAGER INDUSTRIES, INC. Yeager manufactures front-end display racks from
        facilities in Philadelphia, Pennsylvania. We purchased the assets of
        Yeager and assumed its operating liabilities in January 1999 for $2.3
        million in cash and 164,289 shares of our common stock, valued at the
        time of the acquisition at $1.2 million. The purchase price may be
        increased by up to $500,000, depending upon Yeager's performance during
        fiscal 2000 and 2001.

    -   MYCO, INC. MYCO is a Rockford, Illinois manufacturer of front-end
        display racks. We purchased the assets and assumed the operating
        liabilities of MYCO in February 1999 for $12.0 million in cash and
        134,615 shares of our common stock, valued at the time of the
        acquisition at $875,000. We also assumed MYCO's industrial revenue bond
        indebtedness of $4.0 million and repaid MYCO indebtedness of $1.5
        million. The purchase price may be increased by up to an additional
        250,000 shares of our common stock depending on MYCO's performance in
        the twelve months following the acquisition.

    -   CHESTNUT DISPLAY SYSTEMS, INC. Chestnut manufactures front-end display
        racks from facilities in Greenville, South Carolina and Jacksonville,
        Florida. We purchased the assets and assumed the operating liabilities
        of Chestnut Display Systems, Inc. and its affiliate, Chestnut Display
        Systems (North), Inc. in February 1999 for $3.6 million in cash and
        285,714 shares of our common stock, valued at the time of the
        acquisition at $1.8 million. The purchase price for Chestnut may be
        increased to a value (including the amounts already paid) not to exceed
        $9.5 million if Chestnut meets certain performance goals during fiscal
        2000 and 2001. Any increase in the purchase price will be paid 50% in
        cash and 50% in shares of our common stock. The number of shares will be
        calculated using a formula contained in the acquisition agreement,
        subject to a minimum value of $5.00 per share and a maximum value of
        $7.00 per share.

    -   PROMARK. We purchased the assets and assumed the operating liabilities
        of 132127 Canada Inc., known as ProMark, in March 1999. ProMark is a
        Canadian corporation headquartered in Toronto which provides rebate and
        information services to retail customers throughout Canada. ProMark
        strengthens our ability to obtain information about retail sales from
        checkout areas in Canada. We paid a cash purchase price of Cdn$1.5
        million for ProMark.

    -  AARON WIRE AND METAL PRODUCTS, LTD. Aaron Wire manufactures front-end
       display racks from its facilities in Vancouver, British Columbia. In July
       1999, we acquired the stock of Aaron Wire for approximately Cdn$2.4
       million.

    -  HUCK STORE FIXTURE COMPANY. Huck manufactures wood store fixtures from
       its facilities in Quincy, Illinois and Carson City, Nevada. In August
       1999, we signed a letter of intent to purchase the assets and assume
       certain liabilities of Huck.



                                       15

<PAGE>   18

RESULTS OF OPERATIONS

The following table sets forth, for the periods presented, information relating
to our operations expressed as a percentage of Total Revenues:

<TABLE>
<CAPTION>

                                                                            Three Months Ended         Six Months Ended
                                                                                 July 31,                  July 31,
                                                                                 --------                  --------
                                                                            1998         1999         1998         1999
                                                                            ----         ----         ----         ----
<S>                                                                         <C>           <C>         <C>          <C>
Service Revenues                                                            100.0%        23.7%       100.0%       22.6%
Manufacturing Revenues                                                        -.-         76.3          -.-        77.4
                                                                            -----        -----        -----       -----
    Total Revenues                                                          100.0        100.0        100.0       100.0
Cost of Service Revenues                                                     44.1         14.2         43.8        13.1
Cost of Goods Sold                                                            -.-         42.9          -.-        44.6
                                                                            -----        -----        -----       -----
    Gross Profit                                                             55.9         42.9         56.2        42.3
Selling, General and Administrative Expense                                  15.5         19.5         17.0        19.9
                                                                            -----        -----        -----       -----
    Operating Income                                                         40.4         23.4         39.2        22.4
Interest Expense, Net                                                        (2.5)        (2.3)        (2.9)       (2.0)
Other Income (Expense), Net                                                   -.-          0.2         (0.1)        0.5
                                                                            -----        -----        -----       -----
Income Before Income Taxes                                                   37.9         21.3         36.2        20.9
                                                                            -----        -----        -----       -----
    Net Income                                                               22.1%        12.1%        21.1%       11.8%
                                                                            =====        =====        =====       =====

</TABLE>

QUARTER ENDED JULY 31, 1999 COMPARED TO QUARTER ENDED JULY 31, 1998

Service Revenues. Services, which include the Claim Submission Program, Advance
Pay Program, PIN and front-end management, accounted for approximately 23.7% and
21.8% of our revenues and operating income, respectively, for the quarter ended
July 31, 1999. Service revenues of $3.8 million increased $200,000, or 5.6%
compared to the second quarter of the prior year as a result of a decrease in
front-end management revenues offset by an increase in revenues from the Claim
Submission and Advance Pay Programs. The decrease in revenues from front-end
management resulted from our acquisitions of display rack manufacturers.

Manufacturing Revenues. On January 7, 1999, we acquired Yeager and U.S.
Marketing. On February 1, 1999, and February 28, 1999, we acquired Chestnut and
MYCO, respectively. Results of operations for all companies have been included
in our consolidated financial statements since their respective dates of
acquisition. Manufacturing display racks accounted for approximately 76.3% and
78.2% of our revenues and operating income, respectively, for the quarter ended
July 31, 1999. Manufacturing revenues were $12.2 million in the second quarter
of this year. There were no manufacturing revenues in the second quarter of
fiscal 1999.

Gross Profit. Gross profit increased to $6.9 million for the quarter ended July
31, 1999 from $2.0 million for the quarter ended July 31, 1998, an increase of
approximately $4.9 million, or 243.1%. Approximately $5.4 million of the gross
profit was due to our recently acquired manufacturing subsidiaries. Gross margin
of the service segment decreased to 49.1% for the quarter ended July 31, 1999
from 55.9% for the quarter ended July 31, 1998. The reason for the decrease was
the formation of a unified marketing and sales team that services both the
service and manufacturing segments. All of the team's costs are included as
costs of service revenues.

Selling, General and Administrative Expense. Selling, general and administrative
expense increased to $3.1 million for the quarter ended July 31, 1999 from
$553,000 for the quarter ended July 31, 1998, an increase of $2.5 million, or
464.0%. Of the total, approximately $1.7 million was attributable to our
recently acquired manufacturing subsidiaries. The remaining $800,000 increase
was attributable to our services segment. Selling, general and administrative
expense as a percentage of revenues increased from 15.5% for the quarter ended
July 31, 1998 to 19.5% for the quarter ended July 31, 1999.

Operating Income. Operating income increased to $3.7 million for the quarter
ended July 31, 1999 from $1.4 million for the quarter ended July 31, 1998, an
increase of $2.3 million, or 158.7%. As a percentage of revenues, operating
income decreased to 23.4% for the quarter ended July 31, 1999 from 40.4% for the
quarter ended July 31, 1998. Approximately $2.9 million of operating income was
attributable to the recently acquired manufacturing subsidiaries. Approximately
$800,000 was attributable to the services segment.


                                     16

<PAGE>   19


Interest Expense. Interest expense increased $302,000 compared to the quarter
ended July 31, 1998, principally due to the increased borrowings used to fund
our manufacturing acquisitions and the assumption of the $4 million in
industrial revenue bonds in connection with the MYCO acquisition.

Income Tax Expense. The effective income tax rates for the quarters ended July
31, 1999 and 1998 were 43.5% and 41.7%, respectively. These rates varied from
the federal statutory rate due to state income taxes and expenses not deductible
for income tax purposes. These non-deductible expenses include goodwill
amortization, meals and entertainment and officers' life insurance premiums.

SIX MONTHS ENDED JULY 31, 1999 COMPARED TO SIX MONTHS ENDED JULY 31, 1998

Service Revenues. Services accounted for approximately 22.6% and 29.8% of our
revenues and operating income, respectively, for the six months ended July 31,
1999. Service revenues of $7.3 million increased 158,000, or 2.2% compared to
the first six months of the prior year as a result of a decrease in front-end
management revenues offset by an increase in revenues from the Claim Submission
and Advance Pay Programs. The decrease in revenues from front-end management
resulted from our acquisitions of display rack manufacturers.

Manufacturing Revenues. Manufacturing display racks accounted for approximately
77.4% and 70.2% of our revenues and operating income, respectively, for the six
months ended July 31, 1999. Manufacturing revenues were $25.1 million in the
first six months of this year. There were no manufacturing revenues in the first
six months of fiscal 1999.

Gross Profit. Gross profit increased to $13.7 million for the six months ended
July 31, 1999 from $4.0 million for the six months ended July 31, 1998, an
increase of approximately $9.7 million, or 240.8%. Approximately $10.2 million
of the gross profit was due to our recently acquired manufacturing subsidiaries.
Gross margin of the service segment decreased to 51.1% for the six months ended
July 31, 1999 from 56.2% for the six months ended July 31, 1998. The reason for
the decrease was the formation of a unified marketing and sales team that
services both the service and manufacturing segments. All of the team's costs
are included as costs of service revenues.

Selling, General and Administrative Expense. Selling, general and administrative
expense increased to $6.4 million for the six months ended July 31, 1999 from
$1.2 million for the six months ended July 31, 1998, an increase of $5.2
million, or 429.0%. Of the total, approximately $4.2 million was attributable to
our recently acquired manufacturing subsidiaries. The remaining $1.0 million
increase was attributable to our services segment. Selling, general and
administrative expense as a percentage of revenues increased from 17.0% for the
six months ended July 31, 1998 to 19.9% for the six months ended July 31, 1999.

Operating Income. Operating income increased to $7.3 million for the six months
ended July 31, 1999 from $2.8 million for the six months ended July 31, 1998, an
increase of $4.5 million, or 159.1%. As a percentage of revenues, operating
income decreased to 22.4% for the six months ended July 31, 1999 from 39.2% for
the six months ended July 31, 1998. Approximately $5.1 million of operating
income was attributable to the recently acquired manufacturing subsidiaries.
Approximately $2.2 million was attributable to the services segment.

Interest Expense. Interest expense increased $477,000 compared to the six months
ended July 31, 1998, principally due to the increased borrowings used to fund
our manufacturing acquisitions and the assumption of the $4 million in
industrial revenue bonds in connection with the MYCO acquisition.

Income Tax Expense. The effective income tax rates for the six months ended July
31, 1999 and 1998 were 43.8% and 41.5%, respectively. These rates varied from
the federal statutory rate due to state income taxes and expenses not deductible
for income tax purposes. These non-deductible expenses include goodwill
amortization, meals and entertainment and officers' life insurance premiums.



LIQUIDITY AND CAPITAL RESOURCES

Our primary cash requirements for the service segment are for funding the
Advance Pay Program and for meeting general working capital requirements. Our
primary cash requirements for the manufacturing segment are for purchasing
materials and the cost of labor incurred in the manufacturing process.
Historically, we have financed our business activities through cash flows from
operations, short-term borrowings under available lines of credit and through
the issuance of equity securities.


                                       17

<PAGE>   20

During fiscal 1999, 1998 and 1997, we advanced approximately $59.8 million,
$41.7 million and $16.7 million, respectively, under the Advance Pay Program.
These advances grew by 43.4% from fiscal 1998 to fiscal 1999 and from 149.7%
from fiscal 1997 to fiscal 1998. Generally, the primary source of funding the
advances is our credit facility, which is discussed below. During the quarter
ended July 31, 1999, the Program was funded primarily by proceeds from the
recently completed common stock offering. Collections under the Advance Pay
Program are used to pay down any outstanding balance under the credit facility.
Thus, the credit facility is primarily used to manage the timing of payments and
collections under the Advance Pay Program. Growth of the Advance Pay Program
will be monitored and controlled to ensure that funding will be available either
through cash provided by operations or borrowings under our credit facility.

Net cash used by operating activities was $7.7 million for the six months ended
July 31, 1999 compared to net cash provided by operating activities of $1.1
million for the six months ended July 31, 1998.

Net cash used in investing activities was $22.9 million for the six months ended
July 31, 1999 and $2.8 million for the six months ended July 31, 1998. The
increase was due primarily to the acquisitions during the six months. Net cash
provided by financing activities was $32.7 million in the six months ended July
31, 1999 and $1.8 million in the six months ended July 31, 1998. The increase
was due primarily to proceeds from the common stock offering in July.

Our service business has not required significant capital expenditures. As a
result, at July 31, 1999, we did not have any commitments for capital
expenditures. Currently, we do not anticipate any significant capital
expenditures during fiscal 2000.

At July 31, 1999, our total long-term debt obligations were approximately $4.4
million. In March 1999, we amended and restated our Credit Agreement with
Wachovia Bank, N.A. to provide for a $15.0 million term loan and a $15.0 million
revolving credit facility. Proceeds of the term loan, which were received on
March 31, 1999, were used to fund our recent acquisitions and borrowings under
the revolving credit facility were used for general corporate purposes,
including funding our Advance Pay Program. The term loan was repaid in full in
July with proceeds from the public offering. The Credit Agreement is secured by
an interest in substantially all of our assets. Since the end of the quarter,
Wachovia has committed to increase our credit facility to $40 million.

At July 31, 1999, we had no outstanding balance under the revolving credit
facility. The revolving credit facility bears interest at a variable rate based
on the London Interbank Offered Rate and carries a facility fee of 0.375% per
annum on the average daily balance of the unused portion. The revolving credit
facility has no termination date, although Wachovia Bank has the right to
terminate the facility upon not less than thirteen (13) months prior written
notice. We believe that Wachovia will not terminate this arrangement in the
foreseeable future. However, should Wachovia terminate the credit facility, we
would be required to use funds from operations, obtain other financing or issue
equity securities to repay the debt. If we were unable to obtain alternative
financing, our ability to fund the Advance Pay Program would be substantially
impaired.

Under the Credit Agreement, we are subject to various financial and operating
covenants. These include (i) requirements that we satisfy various financial
ratios, (ii) restrictions on our ability to make capital expenditures exceeding
$3.5 million in any fiscal year, and (iii) limitations on the payment of cash
dividends or other distributions on capital stock or payments in connection with
the purchase, redemption, retirement or acquisition of capital stock.

In connection with the acquisition of MYCO, Inc., the Company assumed the
liabilities of MYCO's Industrial Revenue Bonds. On January 30, 1995, the City of
Rockford issued $4 million of its Industrial Project Revenue Bonds, Series 1995,
and the proceeds were deposited with the Amalgamated Bank of Chicago, as
trustee. Wachovia has issued a rolling 13-month letter of credit for $4.1
million to us. The bonds are secured by the trustee's indenture and the $4.1
million letter of credit. The letter of credit is secured by substantially all
of our assets. The bonds bear interest at a variable weekly rate (approximately
80% of the Treasury Rate) not to exceed 15% per annum. The bonds mature on
January 1, 2030. Fees related to the letter of credit are 1% per annum of the
outstanding bond principal plus accrued interest.

In June 1999, we purchased our leased facility in High Point, North Carolina for
$1.8 million. We financed this purchase through available borrowings under our
revolving credit facility.

We believe that our cash flow from operations together with our revolving line
of credit and the proceeds from our common stock offering will be sufficient to
fund our working capital needs and capital expenditures for the foreseeable
future.


                                       18
<PAGE>   21

NEW ACCOUNTING STANDARDS

SFAS No. 130, "Reporting Comprehensive Income," was issued in June 1997.
Comprehensive income is defined as net income plus certain items that are
recorded directly to shareholders' equity, such as unrealized gains and losses
on available-for-sale securities. We adopted SFAS No. 130 in the first quarter
of fiscal 1999.

SFAS No. 131, "Disclosure about Segments of an Enterprise and Related
Information," is effective for financial statements for periods beginning after
December 15, 1997, but interim reporting is not required in 1998. An operating
segment is defined under SFAS No. 131 as a component of an enterprise that
engages in business activities that generate revenue and expense for which
operating results are reviewed by the chief operating decision maker in the
determination of resource allocation and performance. See Note 8 in the "Notes
to Consolidated Financial Statements."

SOP 98-5, "Reporting on the Costs of Start-Up Activities," requires that the
costs of start-up activities, including organization costs, be expensed as
incurred. This Statement is effective for financial statements issued for fiscal
years beginning after December 15, 1998. The Company believes that the adoption
of SOP 98-5 will have no material effect on the financial statements.

In June 1998, the Financial Accounting Standards Board issued SFAS No. 133
"Accounting for Derivatives and Hedging Activities," which establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, (collectively referred to as
derivatives) and for hedging activities. SFAS No. 133 is effective for all
fiscal quarters of fiscal years beginning after June 15, 2000. The Company does
not expect the adoption of this statement to have a significant impact on the
results of operations, financial position or cash flows.

YEAR 2000 COMPLIANCE

Year 2000 Overview - Most of the services we provide are dependent upon computer
technology. Since early 1997, we have been analyzing and testing all of our
information technology (IT) and non-IT data systems for possible Year 2000, or
Y2K, problems and have been remediating any Y2K problems detected. As of May 31,
1999, we had analyzed five, or approximately 83%, of our six IT systems and had
tested two, or approximately 33%, of our six IT systems for Y2K compliance. We
are in the process of evaluating the analysis and testing of our non-IT systems
to determine the completion status of our non-IT Y2K compliance efforts. We
intend to complete all analysis by August 1999 and all testing and remediation
by the end of December 1999 for both our IT and non-IT systems.

Claim Submission Program. We developed our Claim Submission Program IT software
with a third party. We completed Y2K compliance analysis and testing on this
software in February 1999 and have corrected all Y2K problems detected during
that testing. In addition, we have upgraded the operating system on the hardware
platform for the Claim Submission Program software to be Y2K compliant. We
expect to conduct follow up testing and remediation, if necessary, on all Claim
Submission Program IT software by the end of October 1999. Our Claim Submission
Program also utilizes non-IT phone lines for electronic data transmission. We
have been unable to confirm Y2K compliance with the third party provider of our
phone services. In the event our telecommunications services experience
Y2K-related failures, we would employ alternative, though less efficient,
methods of data transmission, such as electronic tape transfer and hard copy
data printouts.

Advance Pay Program. The IT component of our Advance Pay Program involves
transporting data on rebate claims into a Microsoft Excel 97 software program
which reformats the data to determine the amount of advance payments due to our
retailer customers. Microsoft Excel 97 has been declared Y2K compliant by the
vendor, which is consistent with our internal testing results. There are no
non-IT functions involved in our Advance Pay Program. Because we do not
anticipate any Y2K problems with our Advance Pay Program, we have not developed
a Y2K failure contingency plan for the program.

PIN Program. The IT component of our PIN Program was developed by our internal
programming staff with Microsoft Visual Foxpro version 6.0, which has been
declared Y2K compliant by the vendor. We expect to complete testing and
remediation, if necessary, of this program by the end of October 1999. As of May
1999, we had not detected any Y2K problems that would adversely affect this
program. There are no non-IT functions upon which the PIN Program is dependent.
We have not developed a Y2K failure contingency plan for the PIN Program because
we do not believe the program will experience any Y2K-related failures.

ICN. The IT functions of our ICN website were developed by our internal
programming staff using Web Connects Software, which has been declared Y2K
compliant by the vendor. Background databases are programmed in Microsoft Visual
Foxpro


                                       19

<PAGE>   22


version 6.0, which has also been declared Y2K compliant by the vendor.
Because the ICN system utilizes a 4-digit date field, we do not anticipate any
Y2K problems. We expect to complete Y2K testing and remediation, if necessary,
of this program by the end of October 1999. The only non-IT function of ICN
involves telecommunications. We intend to establish a contingency plan involving
other methods of data transmission for this component of ICN by December 1999.

Front-end Management Services. Our Front-end Management Services IT software was
developed by a third party software developer with MacroMedia Director software,
which has been declared Y2K compliant by the vendor. The developer also has
confirmed that our customized Front-end Management Services software package is
Y2K compliant. We expect to complete internal testing of this software by
October 1999 and believe that any problems detected will be corrected by the
developer before the end of 1999. There are no non-IT functions related to our
Front-end Management Services. Because we do not anticipate Y2K issues, we have
not developed a contingency plan for our Front-end Management Services.

Display Rack Manufacturing. Our Display Rack Manufacturing subsidiaries were
acquired within the past five months. We are in the process of collecting data
to verify Y2K compliance issues which may affect these subsidiaries. We intend
to complete our Y2K analysis and testing for both the IT and non-IT systems of
our manufacturing subsidiaries by the end of July 1999 and to then commence any
required remediation work if any problems are detected.

IT Systems - We intend to correct any Y2K deficiencies in our manufacturing
subsidiaries' IT systems prior to the end of 1999. Our preliminary analysis and
testing of our manufacturing subsidiaries' IT systems have revealed the
following:

     - MYCO's primary computer system and all personal computers have been
tested and verified in writing by the software vendor to be Y2K compliant. All
of Chestnut's personal computers have passed Y2K compliance tests. We are
continuing to analyze and test computers at our other manufacturing
subsidiaries.

     - Our preliminary findings indicate that, with the exception of MYCO, the
accounting software of all of our manufacturing subsidiaries is not Y2K
compliant. We intend to select and implement a uniform Y2K compliant accounting
package for all of our manufacturing subsidiaries by the end of 1999.

     - The billing software for all of our manufacturing subsidiaries is not Y2K
compliant. We intend to upgrade or replace this software before the end of 1999.

     - Currently, the payroll software used by Brand and MYCO is Y2K compliant.
The payroll software used by Yeager and Chestnut, however, is not Y2K compliant.
We intend to replace all non-compliant payroll software with Y2K compliant
programs by the end of 1999.

     - Certain aspects of MYCO's inventory and raw materials control software
are not Y2K compliant. We intend to upgrade or replace this software by the end
of 1999.

     - Brand utilizes a Novell network which is not currently Y2K compliant. We
intend to correct this problem by the end of 1999.

     - Brand's cost sharing software is not Y2K compliant. Internal systems are
currently being designed to replace this system and are expected to be
implemented before the end of 1999.

Non-IT Systems - Our non-IT manufacturing systems consist principally of
software used in our manufacturing equipment and phone systems. Because our
non-IT manufacturing systems are not significantly dependent upon date sensitive
functions, we do not expect any material problems with these operations the
event they are not fully Y2K compliant. We continue to assess and test the Y2K
compliance status of our manufacturing and phone systems and intend to take
necessary steps to ensure that these systems will be substantially Y2K compliant
by the end of 1999. Our preliminary analysis and testing of our manufacturing
subsidiaries' non-IT systems have revealed the following:

     - We believe the only non-IT systems used by MYCO are those pertaining to
its manufacturing operations and its phone system. Based on our analysis, there
do not appear to be any Y2K issues associated with MYCO's production process.
MYCO's phone system has been orally declared compliant by the vendor.

     - The only non-IT systems in Chestnut's manufacturing operations involve a
wire bender for which we have received written confirmation of Y2K compliance
from the vendor. We are assessing the Y2K status of Chestnut's phone system.


                                       20
<PAGE>   23

     - Letters have been received from each vendor of Yeager's production
equipment stating that this equipment is Y2K compliant. We are assessing the Y2K
status of Yeager's phone system.

     - We are not aware of any Y2K problems relating to Brand's non-IT
manufacturing systems. We are assessing the Y2K status of Brand's phone system.

Third Party Assessments - We have communicated orally or in writing with
approximately 90% of our magazine wholesaler, national distributor and magazine
publisher trading partners in order to assess their Y2K readiness. Based on
those communications, we believe that almost all of those with whom we have
communicated expect to be Y2K compliant before the end of 1999, and we do not
presently have reason to believe that there will be significant Y2K problems
with any of these third parties that would impair our normal operations. In
addition to our oral communications with magazine wholesalers, national
distributors and magazine publishers, we sent a letter in May 1999 to 139
magazine wholesalers to verify their Y2K compliance. We have received responses
from 13, or 9%, of those contacted. Only one respondent indicated that it is not
Y2K compliant, though it indicated that it intends to upgrade the noncompliant
software by the end of June 1999. We intend to contact all parties who have
failed to respond to our Y2K inquiries by August 1999.

We are in the process of making verbal and written Y2K inquiries of our vendors,
suppliers and customers. We expect to complete these inquiries by August 1999.
We have also communicated with our suppliers of non-IT operations and services
(such as electricity and telecommunications providers). Based on these
communications, we do not presently have reason to believe that there will be
Y2K problems involving any of these third parties that would materially impair
our operations. In the event any of our vendors or suppliers are not Y2K
compliant by the end of 1999, we intend to establish relationships with other
vendors or suppliers to replace those who are non-compliant.

Potential Y2K Risk - We believe that the most reasonably likely worst-case
scenario due to our internal and third party external systems not being Y2K
compliant would be the inability to perform the above-described services in a
most time-efficient manner and thereby meet client deadlines. We depend on data,
materials and other services from third parties in order to provide information
and manufacturing services to our clients. If these third parties have problems
supplying data, materials and other services to us, then deadlines for our
clients may not be met. If our internal systems are not Y2K compliant, data,
materials and services received from third parties cannot be processed in a
timely manner. This could also lead to missed deadlines, which could have a
negative impact on our relationships with our customers and a material and
adverse effect on our financial condition and results of operations.

Contingency Plan - Currently, we have not completed a Y2K contingency plan. A
final contingency plan will be developed upon completion of all system testing
and is expected to be completed by the end of 1999.

Y2K Expenses - As of May 1999, we had incurred expenses of less than $10,000 for
Y2K analysis, testing and remediation. We anticipate that our additional
expenses in connection with our remaining Y2K compliance efforts will not exceed
$40,000. We have not included any expenditures for Y2K compliance in our budget.
There can be no assurance that our additional expenses, in particular in
connection with our manufacturing subsidiaries, will not be significant.



                                       21
<PAGE>   24


                           PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

         Not Applicable

ITEM 2.  CHANGES IN SECURITIES

         Not Applicable

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

         Not Applicable

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

         There were no matters submitted to a vote of security holders in the
quarter ended July 31, 1999.

ITEM 5.  OTHER INFORMATION

         Not Applicable

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.

(a)      Exhibits.

         See Exhibit Index.

(a)      The following Current Reports on Form 8-K were filed during the quarter
         ended July 31, 1999.

         (i)       The Company's Current Report on Form 8-K/A dated May 12,
                   1999, containing the combined financial statements of MYCO,
                   Inc. and RY, Inc., together with the related Independent
                   Auditors' Report, for the years ended December 31, 1998 and
                   1997 and certain pro forma information.

         (ii)      The Company's Current Report on Form 8-K/A dated June 10,
                   1999 containing the combined financial statements of MYCO,
                   Inc. and RY, Inc., together with the related Independent
                   Auditors' Report, for the years ended December 31, 1998 and
                   1997 and certain pro forma information.

         (iii)     The Company's Current Report on Form 8-K/A dated June 10,
                   containing the consolidated financial statements of U.S.
                   Marketing Services, Inc., together with the related Report of
                   Independent Public Accountants, for the period from March 25,
                   1998 (inception) through December 31, 1998; combined
                   financial statements of Brand Manufacturing Corp. ("Brand")
                   and TCE Corporation ("TCE"), together with the related Report
                   of Independent Public Accountants, for the period from
                   January 1, 1998 through May 20, 1998; financial statements of
                   Brand, together with the related Report of Independent
                   Auditors, for the year ended December 31, 1997; financial
                   statements of TCE together with the related Report of
                   Independent Auditors, for the year ended December 31, 1997;
                   pro forma financial information; unaudited pro forma combined
                   condensed balance sheet as of October 31, 1998, including
                   notes thereto; unaudited pro forma combined condensed
                   statement of operations for the nine months ended October 31,
                   1998 and for the year ended January 31, 1998, including notes
                   thereto; and certain pro forma information.

         (iv)      The Company's Current Report on Form 8-K/A dated June 25,
                   1999 containing the combined financial statements of MYCO,
                   Inc. and RY, Inc., together with the related Independent
                   Auditors' Report, for the years ended December 31, 1998 and
                   1997 and certain pro forma information.


                                       22

<PAGE>   25


                                   SIGNATURES

In accordance with the requirements of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                    THE SOURCE INFORMATION MANAGEMENT COMPANY


Date:  September 14, 1999                     /S/ W. BRIAN RODGERS
                                              -----------------------
                                              W. Brian Rodgers
                                              Chief Financial Officer




                                       23

<PAGE>   26


                                  EXHIBIT INDEX

Exhibit
Number                     Description
------                     -----------

27.1                       Financial Data Schedule (Filed in EDGAR version only)





                                       24